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Sell in FMCG: the 5 essential KPIs to smart market your product

Written by Ángela ·

The FMCG market (fast-moving consumer goods) accounts for more than half of all consumer spending. For those who want to effectively sell in FMCG, it’s important to focus on the right key performance indicators and measure success. We’ve prepared an easy-to-follow list of the most important KPIs to keep in mind when analysing your brand’s performance. Let’s get started:

Distribution percentages

The percentage of distribution can be expressed twofold: numeric and weighted distribution. Analysing these two combined variables provides insight into the state of the product distribution within a network as well as the positioning an FMCG product has in comparison to the competition on various distribution channels.

These two variables can be understood as the following:

1. Numeric distribution percentage

This is the percentage of stores that sell an FMCG product within a given area. The value can be determined by dividing the number of stores distributing a product by the total number of stores in the zone. This number is then multiplied by 100 to obtain a percentage.

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The higher the percentage of numeric distribution, the more presence a product has in stores. Nevertheless, this data should be compared to how the product is positioned amongst the competition as well for deeper analysis. Brands that selectively distribute their products would have lower numeric distribution percentages, but that does not mean their sales are necessarily lower—this will depend on the strategy executed.

2. Weighted distribution percentage

This percentage is related to the sales turnover of a product category in comparison to the sales turnover obtained from stores selling a particular product from that category—this can be calculated globally or locally for a particular area. The value is then multiplied by 100 to create the percentage.

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It is more strategic for brands to place their products in stores that obtain larger percentages of their sales turnover from the categories in which their product belongs. Selling more in the FMCG market is all about smart product placement.

Once the percentages have been calculated for both the numeric and weighted distributions, it’s important to compare them. The goal is to have a higher weighted distribution percentage than a numeric one. For example, if your weighted distribution is at 90% and your numeric distribution is 10%, this means that your product is only distributed in 10% of the stores selling this particular product category in a given area. However, even though your product is only sold in 10% of the entire product category universe, you’ve got a 90% market penetration rate making your brand the market leader in that locality. This is the ideal scenario to sell in FMCG effectively. Try to find out which market conditions are making those POS areas so successful—are the age and type of customer important factors? Maybe it’s the amount of footfall traffic that point-of-sales location receives? You can discover all of this and more with Location Intelligence technology and then replicate those exact conditions and find new POS areas that match your success criteria in different localities.

If your numeric distribution rate is higher than your rated distribution rate, something is not quite right. For instance, imagine your product is numerically distributed in 80% of all the POS establishments selling your brand’s type of product. However, your weighted distribution amounts to 20%. This means that your brand is distributing to many different stores that sell your product category, but your brand’s sales turnover only makes up for 20% of the total sales of that product category for a particular area. This failing distribution plan could be the result of one of the following reasons:

  • poor negotiation with retailers
  • mismanagement of sales forces
  • unprofitable points-of-sales locations
  • ineffective sales promotion

By comparing these two KPIs, brands can understand the effectiveness of their distribution strategies better and assign concrete objectives to their sales teams as a means to use resources efficiently and increase revenue.

Market share to sell in FMCG

Market share value is an essential key performance indicator and measures the overall success of a brand and its products available on the market. This percentage consists of the company’s sales turnover divided by the overall turnover of the sector. After, this value is multiplied by 100 to obtain the correct percentage.

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3. Market share distribution

While overall market share is important, market share distribution is more contextual. This value provides useful information on the market share a company obtains at the distribution level. The percentage can be calculated by first transforming the market share and weighted distribution percentages into decimals. Then, divide the market share decimal value by the weighted distribution decimal value and multiply by 100 to get the percentage again.

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For example, if my brand maintains 5% market share and is only present in 10% of the stores selling the product category, the equation would look like the following:

selling in fmcg

According to this equation, the distributed market share of my product would be 50%. This means that in the locations where my product is present, the market penetration is at 50% for those points-of-sales areas. Distributed market share is a contextual KPI that can be used to provide profound analysis of a product’s potential in the market—and motivate sales teams to find more POS locations similar to those and gain more market share in the future.

Consumption indicators

4. Product penetration rate

This value consists of the percentage of households, individuals or consumers who buy a particular product. It is equivalent to the number of people who buy the product divided by the total number of people in a given area. This amount is then multiplied by 100 to obtain the percentage.

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The product penetration rate is often evaluated to measure the effectiveness of an advertising campaign or promotion. It’s also studied to determine how much of a potential market is left to be won.

5. Share of Wallet

Share of wallet (SOW) is an indicator that helps managers understand the amount of business they receive from certain customers. It’s used to measure their loyalty and commitment to the brand. To calculate this metric, all you need to do is divide the total amount spent by customers to purchase your product by the amount spent on the product category and then multiply by 100 to get the percentage.

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If a brand’s wallet share is 80%, it means that the customers are loyal to the brand’s particular product four out of five times when the quantities purchased are consistent. This is how many professionals can measure brand loyalty for their products and sell more consistently in the FMCG market.

Location Intelligence to boost FMCG performance

The KPIs listed above can be used to determine if there are any inconsistencies in an FMCG brand’s product mix and measure success—distribution, positioning, turnover and loyalty. The results obtained from these analyses can serve as a solid starting point for FMCG professionals who want to truly understand their product’s performance and optimise their strategy. Nevertheless, there are new technologies available on the market that can also help to streamline this process such as Location Intelligence.

If a discrepancy is detected between the numeric and weighted distribution percentages, Location Intelligence tools can provide you with a list of the top performing POS areas your brand has. Then you can determine which sociodemographic or economic factors are contributing to the success rates of those points-of-sales areas (or not). This will help you to identify problem areas and deploy your sales force efficiently—not wasting resources on POS areas that are not working.

Likewise, if the product penetration rates are extremely high for the point-of-sales locations your product is placed in, Location Intelligence technology can help you to find new POS areas that match those same market conditions (age, income, footfall traffic, etc.). This, in turn, will provide more tactical direction for your sales teams so they know which potential POS areas could result in the highest returns and develop their distribution networks accordingly.

The benefits of smart big data are endless, and many FMCG brands are beginning to understand the lucrative impact this technology could have on their business. If you want to learn more about how Location Intelligence can help you sell in the FMCG sector the smart way, do not hesitate to request a demo.

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